On July 15, 2022, the Government of Canada initiated a public consultation process regarding the development of a model digital trade agreement. The government is seeking the views of industry stakeholders, non-governmental organizations, and other interested Canadians regarding the development of the model agreement, its potential scope and content, as well as potential trading partners with whom Canada may seek to negotiate.
We provide some background regarding digital trade and explore the potential implications of the development of a model agreement below.
Background: What is Digital Trade?
Digital trade is a broad concept that is most often used to refer to digitally enabled, cross-border commercial transactions of goods and services that may be either digitally or physically delivered. For example, the purchase of goods (e.g., books) through an online marketplace is facilitated by digital technologies, but such goods may ultimately be physically delivered. Digitally enabled transactions of goods and services may also forego physical delivery and hence overcome geographical barriers in the context of cross-border trade. Streaming services, for example, are digitally enabled and the services (e.g., music, movies, and television programs) are digitally delivered to customers.
Digital trade also encompasses cross-border transfers of data that are essential to the global connectivity of businesses, governments, and supply chains. This movement of data has enabled the creation of new and rapidly evolving services that promote more efficient business operations, such as cloud computing, artificial intelligence (AI), the Internet of Things (i.e., the interconnection of physical objects embedded with technologies connecting and exchanging data with other devices via the internet), and additive manufacturing (i.e., digital engineering and manufacturing).
Purposes of a Digital Trade Agreement
Many of Canada's recent international trade agreements cover digital trade, though these have focused narrowly on digital products (e.g., computer programs, sound recordings or other products that are digitally encoded) that can be transmitted electronically, rather than digitally encoded and physically delivered products (as these are captured by existing rules). The Canada-United States-Mexico Agreement (CUSMA), for example, contains a chapter on Digital Trade that commits the parties not to apply customs duties to digital products, to protect personal information, and to cooperate on important security issues in electronic communications. Likewise, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) contains a chapter on Electronic Commerce that includes similar commitments.
More recently, countries that recognize the economic opportunities associated with the expansion of digital trade have begun to negotiate dedicated digital trade agreements. The most noteworthy example is the Digital Economic Partnership Agreement (DEPA), originally initiated between Chile, New Zealand, and Singapore, which Canada has requested to join. The DEPA builds upon the CPTPP Electronic Commerce chapter by adding enhanced commitments related to facilitating digital trade and cooperation on emerging issues including AI, privacy, and digital inclusion.
By establishing a model Canadian digital trade agreement, Canada is attempting to position itself at the forefront of the development of international rules governing digital trade policies. The development of a model agreement would enable Canada to work with potential trading partners in order to pursue its goals of facilitating commercial activity, addressing potential market access impediments, and building consumer trust and confidence. The Canadian government anticipates that businesses would benefit from greater certainty and predictability, particularly small and medium-sized businesses that can face significant cost and administrative burdens complying with ambiguous or unbalanced digital trade rules.
Those wishing to provide input on the development of a model digital trade agreement may do so by e-mail prior to the closing of the consultation period on September 13, 2022. Potential topics that could be addressed include, but are not limited to, competition policies; cybersecurity; intellectual property; subsidies; standards and interoperability; electronic transaction frameworks; and online consumer protection.
Further consultations are expected after the initial consultation process. Fasken will continue to monitor developments regarding the development of a model digital trade agreement and provide updates accordingly.
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